5 “Innovation Styles” for Organizing the Innovation Process

1. 5 “Innovation Styles” for Organizing the Innovation Process The Cauldron The PacMan The Fertile Field The Explorer The Spiral Staircase

2. The Cauldron Unleash entrepreneurial energy in a concentrated mixture of talent, ideas and resources • Key Levers • Internal markets for new ideas • Venture capital model of internal entrepreneurs seeking funding from both internal and approved external sources • Use of peers, rather than bosses, to screen and evaluate opportunities • Loose structure and frequent organizational changes • Example: Enron • “You cannot control the atoms within a nuclear fusion reaction. We allow people to go in which ever direction that they want to go. And they’re incented to do all the steps of innovation themselves. And around that, we put broad risk-reward controls.” – Ken Rice, Enron Capital & Trade Resources

3. The Fertile Field Cultivate and harvest a rich portfolio of strategic assets and core competencies • Key Levers • Manage the overall portfolio of core competencies and strategic assets • Bring people together across organizational boundaries to share information and discover opportunities • Create mechanisms that gather, disseminate, and track new ideas and learnings for all employees • Determine when and if to spin off a growing business • Examples • Emerson Electric (Growth Process) • Royal Dutch/Shell (Gamechanger) • Lucent Technologies

4. The Spiral Staircase Continuously improve and innovate in the core business • Key Levers • Create a profound sense of core purpose • Let everyone know their innovation contribution is important • Give teams the leadership and autonomy they need to win • Create a culture of experimentation and commitment to learn • Examples • Charles Schwab • British Airways • Allstate (BVP Process)

5. The PacMan Acquire successful innovators and integrate competencies into existing businesses • Key Levers • Use strategic intent to guide the entrance into new markets and development of new competencies • Develop alternatives early in the innovation process • Take stakes in promising start-ups, using the market as a screen • Assess competitive responses to strategy innovations • Examples: • Cisco • Microsoft, WorldCom

6. The Explorer Unleash entrepreneurial energy in a concentrated mixture of talent, ideas and resources • Key Levers • Aspire beyond what seems possible • Design and carry out effective and low-cost experiments • Use Strategic Intent to guide the entrance into new markets and development of new competencies • Emphasize continuous, cumulative learning • Examples: • Monsanto (15 years to shift from chemicals to life sciences) • Corning(12 years to develop optical fiber) • Motorola (10 years to develop cell phones)

7. Spiral Staircase Characteristics of Various Innovation Styles Is the primary focus to... Develop new rapidly Improve on existing business? Cauldron Do you need new assets and competencies? Leverage existing over time Near term with defined market? Fertile Field How well defined is the opportunity and how long will it take? Create new businesses? Long term with undefined market Acquire in marketplace PacMan How can you best develop new assets and competencies? Develop internally Explorer